What price an assembly plant?
In July, Foxconn Technology Group pledged to invest $10 billion to build an assembly plant in southeastern Wisconsin to make liquid crystal displays for computer screens, televisions and dashboards. The project will essentially create a village, with housing, stores and service businesses spread over 1,000 acres. At 20 million square feet, the factory itself will be three times the size of the Pentagon, making it one of the largest manufacturing complexes in the nation.
The factory, which could be open as soon as 2020, promises a jobs bonanza for the Badger State. The plant will initially employ 3,000 workers making an average of $53,900 a year, plus benefits. Ultimately, it could employ up to 13,000 workers and create an additional 22,000 jobs through suppliers and businesses serving Foxconn and its workers. The construction alone could lead to 10,000 jobs over each of the next four years.
Congratulations, Wisconsin! We are thrilled that a massive new assembly plant is being built here in the U.S., particularly one making a high-tech product like flat-panel displays. Still, we can’t help but express a little concern that Wisconsin officials may be giving away too much to get it.
To land the factory, Wisconsin is offering nearly $3 billion in tax breaks over 15 years: up to $1.5 billion in state income tax credits for jobs created, up to $1.35 billion in credits for capital investment, and up to $150 million in sales tax exemptions on construction materials. In addition, like other Wisconsin manufacturers, Foxconn would pay no corporate taxes on profits from sales of products made in the state. At press time, the Wisconsin Legislature had yet to approve the deal. If passed, it would be the largest tax package the state has ever offered an employer.
The incentives would cost the state some $200 million a year, but Foxconn’s payroll in Wisconsin could reach $700 million a year. If the factory does, indeed, create 13,000 jobs, the deal would cost $231,000 per job. According to an analysis by the nonpartisan Legislative Fiscal Bureau, it will take at least 25 years for the state to recoup the money it pays out in credits to Foxconn.
The deal includes more than monetary incentives. For example, it waives environmental regulations, so Foxconn can build its factory in wetlands and waterways without first doing an environmental impact statement.
More worrisome, the package includes a provision that would enable Foxconn to appeal lawsuits directly to the Wisconsin Supreme Court, skipping the state appeals court. It would also require any lower court ruling to be put on hold pending action from the Supreme Court, which conservatives control 5-2. Under current law, a judge must put a ruling on hold while an appeal is pending. Is that really necessary? No other Wisconsin business enjoys such privileges. Why should any business—much less a foreign-owned one—get to skip any part of the legal process?
We’re all about manufacturing jobs, but let’s not give away the keys to the kingdom.
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